In calculating unrealised intra-group profit, what percentage of which inventory is considered?

The calculation of unrealised intra-group profit specifically focuses on the inventory that remains within the group at the end of a reporting period. When a group of companies trades with itself, any profit made on the transactions between the companies is not realised until the inventory is sold to an outside party. Therefore, only the inventory that remains unsold at the end of the reporting period is relevant in determining the unrealised profit.

Consequently, the unrealised profit is based on the percentage of goods left in the group inventories. This means that if there is an intra-group sale, any profit included in the value of the inventory held by the group entities that hasn’t yet been sold to an external customer represents an unrealised profit that needs to be eliminated for the consolidated financial statements.

Notably, unrealised intra-group profit adjustments are crucial to ensure that the consolidated financial statements present a true and fair view of the groups' financial performance and position, excluding any profits that have not been realised through sales to third parties.